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Who Pays the HST on a Preconstruction Real Estate Purchase?

Understanding the HST on a New Peconstruction Condo or Home Purchase

 
There is often a substantial amount of confusion surrounding the amount of HST that will be paid for a new or preconstruction home that is purchased from a builder and who exactly will be responsible for paying it. The intended and actual use of the newly built home within the first year will be the deciding factor for who is responsible for paying the portion of HST due at final closing.
 
In the case that the home will be occupied by the owner (or an immediate family member), the HST will typically be paid by the builder with an agreement in place to have the new home HST rebate signed over to the builder to cover the HST costs. The purchase price of the home will be adjusted to be inclusive of the HST to reflect this.
 
Much of the confusion over the HST arises when the new home will be an investment property that will be non-owner occupied. Closing an investment property brings a lot of expenses that will significantly increase the amount due on final closing and title transfer. These expenses include considerable costs such as the provincial land transfer tax, legal fees for closing as well as the City of Toronto land transfer tax (if the home is built in Toronto). Who is responsible for paying the HST in this situation? The purchaser is responsible for paying the portion of HST due upon final closing of the property.
 

What Happens if the Investor Can’t Pay the HST on Final Closing?

 
The confusion surrounding the HST means that many investors are surprised that the substantial HST payment is their responsibility on closing. As a result, many have not properly planned to have the additional money available for payment.  It happens all the time that investors first understand the total closing costs only a week before final closing when they receive the Final Statement of Adjustments from their lawyer.  
 
What can happen if the HST is not paid in full upon final closing? If the final closing is jeopardized, any deposit that has been paid by the investor may be lost to the builder when the purchaser is unable to close on time or in breech of contract. In some cases, if the final closing is not met, the builder can choose to pursue litigation action to recover additional damages.
 

Options for Investors to Pay the HST due on their Preconstruction Unit

 
Investors who are surprised to discover that the responsibility of paying the HST is theirs are often left scrambling for financing options by the final closing date. Unfortunately, most banks and financial institutions do not provide loans for HST payment (the major banks in Canada are mandated not to lend for tax-related purposes).  The HST Rebate (the New Residential Rental Rebate) can be claimed by investors who purchase new properties from a builder to cover the HST that is paid, but the rebate can’t be claimed until after the closing.  Note that the New Residential Rental Rebate also requires a 1 year lease on the property with a tenant.
 
HST relief companies can provide financial assistance to investors by effectively bridging the gap between final closing and the time the HST rebate is received. This type of short term loan is essentially arranged as a line of credit to provide an amount necessary to cover the HST (typically $16,000 - $29,000), which is then paid back after the HST rebate has been claimed and received.
 
In addition to providing the funds necessary to pay the HST and ensure a smooth final closing, HST relief companies will also coordinate and file the necessary paperwork for the HST rebate (including the New Housing HST Rebate claim form) on behalf of the investor.
 
If you are an investor who has been surprised by the HST on a new home purchase, discover the financing options at your disposal to ensure that your final closing is not jeopardized today.

Do I qualify for the HST Rebate? How much HST did I pay?

I am not sure if I paid HST when I closed on my condo.  Where in my paper work can I find our how much HST I paid?

Answers

By HST Relief (Admin)
Great question.  When it comes time to closing a new property, there are several expenses paid when you bring that final cheque to your lawyer's office, including builder fees, levies, lawyer's fees, etc. To find out if you paid HST on the closing of a new investment property, check your Statement of Adjustments.  If the builder was credited the HST Rebate amount, it means you paid it.  Call us to see if you are eligible for recovering this money as an HST Rebate through CRA.  1.866.832.1990.   

Do I have to pay HST if I bought an investment condo in my holding company's name?

Hi - I am an agent.  I was told that I will not have to pay HST on my investment condo because we bought it in the company name, our holding company.  How do I ensure that I am not charged HST?

Answers

By HST Relief (Admin)
Hi Joan,
 
This is incorrect information.  Whether you buy an investment condo in a holding company's name or in your personal name, you will owe HST on closing.  Using the condo as the primary residence of the purchaser(s) listed on the Agreement of Purchase and Sale or for an immediate family member, is the only way one can avoid paying HST on closing.  Although you will owe a portion of HST for your investment condo closing in your holding company's name, you are also still eligible for an HST Rebate, assuming you meet certain criteria.  Please give us a call for the specific details of your situation - 1.866.832.1990    

Short term rentals and HST Rebate

I have possession of a new build condo and I have been renting it out with short-term leases and, occasionally, posting it for rent on AirBnB.  I know it's a requirement to have a lease in place to claim my HST rebate when my condo reaches its final closing date, but is it possible to obtain my HST rebate with proof of short term rental?

Answers

By HST Relief (Admin)
We would strongly advise that you have a 1 year lease in place by your final closing date and to use this 1 year lease to file for the HST Rebate.  If you put in short-term leases, short-term rental contracts, etc. the CRA will deny you your rebate and require you to file an appeal.  At the very least, this will significantly delay you receiving your HST rebate.  CRA will then do a physical audit to assess whether or not you are using the condo as a rental property. 
 
If you have the 1 year lease in place, HST Relief: Rebates & Loans can get you your HST back in 45- 60 days.  If you have other short term contracts, CRA will take 6-8 months to review it and it could be over a year before you receive your HST rebate.   

Will I have to pay HST on my new house in Brampton?

Hi there,
 
I bought a new construction house in Brampton and will rent it out.  Do I owe HST on this?  Or, does HST only apply to investment condos in Toronto? 

Answers

By HST Relief (Admin)
HST is always due to the CRA upon the closing of a sale of new construction properties purchased from a builder in Ontario (and some other provinces).  Some of the HST is built into the purchase price and some of it is due upon closing.  If you purchase a new construction property and live in it as a primary residence, then the builder pays the HST due on closing and the HST rebate is credited to the builder (which you sign off on in your purchase agreement).  If the property is used as an investment property, the purchaser is responsible for coming up with a portion of the HST due at closing as the purchaser has to apply directly for an HST rebate. 
 
In the case of a new construction investment property in Brampton, yes, the purchaser will have to come up with approximately 8% of the purchase price in HST due upon closing.
 
If you need loan to pay the HST due upon closing for an investment property, call HST Relief: Rebates & Loans .  We provide loans in the form of bridge financing until we get your HST back. Call 1-866-832-1990 or email info@hstrelief.ca    

Foreign investor: HST on new investment condo Toronto?

I currently do not live in Canada nor do I have a SIN number.  However, I have purchased investment condos in Toronto that will close later this year.  Do I have to pay the HST and can I get my money back in the form of an HST rebate?

Answers

By HST Relief (Admin)
Yes, as a foreign investor or not, you will be required to pay the portion of HST upon closing because you have purchased a new build condo as an investment in Ontario, Canada.  To qualify for the New Residential Rental Property Rebate, you must have a 1 year lease in place with a tenant or renter in that property.  Even though you are not a Canadian citizen, do not reside in Canada and do not have a SIN number, we can file for your HST rebate and get the money back that you paid in HST on closing. 
 
Call us at HST Relief: Rebates & Loans for more information on how much in HST you will owe for each property and to find out what we will need to file for your rebate and get your money back.  1-866-832-1990  info@hstrelief.ca 

First Canadian Place • 100 King Street West • Suite 5700 • Toronto, ON • M5X 1C7

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